Thursday, September 24, 2015

Retest and Marginal Break

The market is not giving the dip buyers a graceful exit here.  It has been 1 week since we hit the highs of this post crash bounce.  Usually you would have already bounced after such a fall.  If a down move of this magnitude in a post crash market doesn't bounce within 5 trading days from when it starts, usually you go down for 2 to 3 more days to cause a panic waterfall and form the V bottom.  That is the most likely scenario here.

You cannot blame China for this one.  I guess you can blame Europe for this selloff, because that is where a lot of the fast money is parked.  And when the fast money leaves, Europe will feel the blow.

I know it seems almost consensus, but I think we will retest the August 24 lows.  Not the cash index, of 1867, but the futures, which went down to ES 1823, which would put it about SPX 1835.  There is a lot of support in that SPX 1840 to 1850 area, so I would look to buy around there.  Once we make a marginal break of the level everyone is looking at 1867, we should get the final panic flush which would form the V bottom.

As absurd as it seems with all this bearish price action, the selloff is on borrowed time.  I go back to a dovish Fed which gives the bulls the edge after the dust settles.  I would feel differently if the Fed had raised rates or looked eager to raise rates.  With this Fed, it's still a bull market in my eyes.

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